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Hotline Sample Report

This report is a sample for information purposes only. These recommendations are closed.
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2/8/2010 1:22:12 PM Eastern Time

They Don't Get You
By Charles Payne, CEO & Principal Analyst

The market is grappling for direction but has climbed off the canvass in part to very solid earnings from the likes of Hasbro (HAS) and Consumer Value Stores (CVS), and an upgrade of Home Depot (HD) over at Morgan Stanley. There seems to be a natural inclination at this point for the market to move lower as it seeks out buyers that have become more reluctant to buy the dips. On that note, however, buyers have begun to sniff around tech and commodities over the last week or so. There was big money made in those areas last year and recent pullbacks must conjure up great memories.

I like the action in the market; it has to get cheap and has to shake out non-believers to establish the base for a move higher. On that note, Chinese stocks look and act great. I think that bubble story is overdone; although I will say there is a real estate situation there that has to be addressed, I don't think it's the linchpin to the country's overall economic success. Let's see if there is a late move that might spark some panic buying, which we got a glimpse of late Friday afternoon. Of course it's tough getting overall traction without the financials, but speculation about the next attack on the industry seems to have cast yet another dark shadow.

Long Idea: ARVINMERITOR INC (ARM) @ $9.69
Click here to view the trading alerts that followed this recommendation

Trading Parameters

Entry Price Entry Limit Stop Loss Trading Target Target Long-term Target Options

$9.69 see comments $8.50 N/A $12 $13.00 N/A

Options Trade Parameters

Type Option Symbol Entry Price Strike Price Expiration Date

Call ARM100821C00 $1.80 $10.00 8/21/2010

BACKGROUND: ArvinMeritor, Inc. is a premier global supplier of a broad range of integrated systems, modules and components to original equipment manufacturers and the aftermarket for the transportation and industrial sectors. The company serves commercial truck, trailer and specialty original equipment manufacturers and certain aftermarkets, and light vehicle manufacturers. ArvinMeritor marked its centennial anniversary in 2009, celebrating a long history of 'forward thinking.' ArvinMeritor common stock is traded on the New York Stock Exchange under the ticker symbol ARM. For important information about the company, visit arvinmeritor.com.

SKINNY: The company reported a breakeven result in its most recent quarter (compared to the consensus estimate of a loss of $0.07 per share) as the various restructuring activities over the past three years have begun to pay dividends. Revenues still declined compared to the previous year, but two of its four segments saw year over year revenue growth and we expect to see its largest segment, Commercial Truck, to bounce back over the next six months. The company has a leadership position in most markets it operates in (the company has a number one market share in North America for truck drive axles, truck air brakes, trailer axles, and military drivetrain, suspension and brakes) is investing to grow its market share in Asia (specifically China). The stock was hit hard last week, but we think the stock is oversold. We are looking for the stock to move to $11.50 and then through to $13.00, use $8.50 as a mental stop-loss.

Key Fundamentals

PEG Book Value Institutional Holdings Price/Sales Average Daily Volume Shares Outstanding

2.60 -15.722 80 0.17 1.77M 72.70M

Market Value Insider Activity 52-week High 52-week Low Annual Earnings Estimate

705.91M 4 Sales 12 0.13 0.3

Analyst Coverage

Robert W. Baird- Upgraded to OUTPERFORM JP Morgan- Upgraded to NEUTRAL